Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 3DQ
To determine
The impact of increase in
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The
following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost:
Demand:
P=15-Q
Marginal Revenue: MR = 15-20
Total Cost:
Marginal Cost:
TC=3+Q+0.50²
MC = 3+Q
where Q is quantity and P is the price measured in Wiknamian dollars.
The monopolist produces
soccer balls and sells them at a price of s
each. The monopolist's profit is s
The domestic production of soccer balls will to
Wiknam will
soccer balls in this case.
One day, the King of Wiknam decrees that henceforth there will be free trade-either imports or exports-of soccer balls at the world price of $10. The
firm is now a price taker in a competitive market.
soccer balls, and domestic consumption will to
in this case.
In the analysis of international trade in Chapter 9, a country becomes an exporter when the price without trade is below the world…
Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost:
Demand: P = 10 - Q
Marginal Revenue:MR = 10 - 2 Q
Total Cost TC= 3 + Q+0.5 Q2
Marginal Cost: MC= 1+ Q,
where Q is quantity and Pis the price measured in Wiknamian dollars.
a. How many soccer balls does the monopolist produce? At what price are they sold? What is the monopolist's profit?
b. One day, the King of Wiknam decrees that henceforth there will be free trade-either imports or exports of soccer balls at the world price of $6.The firm is now a price taker in a competitive market What happens to the domestic production of soccer balls? To domestic consumption? Does Wiknam export or import soccer balls?
c. In our analysis of international trade in Chapter a country becomes an exporter when the price without trade is below the…
Only one firm produces and sells soccer balls in the country of Wiknam, and as the story begins, international trade in soccer balls is prohibited. The following equations describe the monopolist's demand, marginal revenue, total cost, and marginal cost:
Demand:
P=15−QP=15−Q
Marginal Revenue:
MR=15−2QMR=15−2Q
Total Cost:
TC=3+Q+0.5Q2TC=3+Q+0.5Q2
Marginal Cost:
MC=3+QMC=3+Q
where QQ is quantity and PP is the price measured in Wiknamian dollars.
The monopolist produces ( ? ) soccer balls and sells them at a price of ($)
each. The monopolist's profit is ($) in this case.
One day, the King of Wiknam decrees that henceforth there will be free trade—either imports or exports—of soccer balls at the world price of $10. The firm is now a price taker in a competitive market.
The domestic production of soccer balls will ( rise or fall ) ? to ( ? ) soccer balls, and domestic consumption will ( rise or fall ) to ( ? ) soccer balls. Therefore, Wiknam will (…
Knowledge Booster
Similar questions
- The following graph gives the demand (D) curve for satellite TV services in the fictional town of Streamship Springs. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local satellite TV company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist. ? PRICE (Dollars per subscription) 100 90 80 70 20 10 0 + 0 2 MR True 6 8 10 12 14 QUANTITY (Number of subscriptions) 16 O False ATC MC 18 20 D Which of the following statements are true about this natural monopoly? Check all that apply. Monopoly Outcome In order for a monopoly to exist in this case, the government must have intervened and created it. The satellite TV company is experiencing economies of scale. It is more efficient on the cost side for one producer to exist in this market rather than a large number of producers. The satellite TV company…arrow_forwardConsider a monopolist that faces a demand curve P = 40 - Q and has a total cost function TC = 12 + 50Q. At which of the following prices (you can choose multiple prices) would a monopolist be better off shutting down? 10 20 30 40arrow_forwardThe following graph shows the demand, marginal revenue, and marginal cost curves for a single-price monopolist that produces a drug that helps releve arthritis pain. Place the grey point (star symbol) in the appropriate location on the graph to Indicate the monopoly outcome such that the dashed lines reveal the profit-maximizing price and quantity of a single-price monopolst. Then, use the green rectangle (triangle symbols) to show the profits earned by the monopolist. 10 Manapaly Outcome Manapaly Profits 4 MC = ATC 1. MR Damand 3 4 QUANTITY (Millians of dasas par yaar) 5 6 10 1 2 6 8 Suppose that should the patent on this particular drug explre, the market would become perfectly competitive, with new firms Immedlately enterling the market with essentially Identical products. Further suppose that In this case the original firm will hire lobbylsts and make donations to several key politicians to extend Its patent for one more year. The firm Is prepared to spend up to $ million to extend…arrow_forward
- The following graph shows the demand (D) for cable services in the imaginary town of Utilityburg. The graph also shows the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve for the local cable company, a natural monopolist. On the following graph, use the black point (plus symbol) to indicate the profit-maximizing price and quantity for this natural monopolist.arrow_forwardSuppose that in the figure to the right, a monopolist knows that if it produces 10 units of output, its total revenues equal $60.00 and its total costs equal $42.70. If it were to reduce the price of its product to $5.80 per unit, the quantity demanded, and hence its output, would rise to 11 units per week. If the total costs of producing 11 units were equal to $48.70 per week, would the marginal revenue of producing the 11th unit be greater or less than the marginal cost of producing that unit? How would the firm's weekly economic profits be affected if the firm were to produce the 11th unit? The marginal revenue of producing the 11th unit would be greater than the marginal cost by $ per unit. (Enter your response round decimal places.) greater than equal to less than Price, Marginal Cost, Marginal Revenue ($ per unit) 0 MC 12 3 4 MR 5 6 7 8 9 10 11 12 13 14 15 Quantity (units per week) o Marrow_forwardIf the quantity demanded at a price of $10 is 2,000 and the quantity demanded at a price of $8 is 2,400, what should a price-discriminating monopolist do to maximize profits?arrow_forward
- Acme is a monopolist for a good with inverse demand P = 4000 – 6Q, where P is the price in dollars and Q is the amount sold. Acme's variable costs are TVC(Q) = 4Q². With these functions, the marginal revenue is MR(Q) = 4000 – 12Q and marginal cost is MC(Q) = 8Q. a) If Acme has no fixed costs, what is its profit maximizing price? b) If Acme has non-sunk fixed costs of $700,000, is it worth operating or should they shut down?arrow_forwardA monopolist has a cost function given by c(y) = y2 and faces a demand curve given by P(y) = 120 − y. a. What is his profit-maximizing level of output? What price will the monopolist charge? b. Suppose you put a lump sum tax of $100 on this monopolist. What would its output be? c. If you wanted to choose a price ceiling for this monopolist so as to maximize consumer plus producer surplus, what price ceiling should you choose? How much output will the monopolist produce at this price ceiling?arrow_forwardSuppose a profit-maximizing monopolist has total cost and marginal cost as follow TC = 8Q + 10 and MC = 8. It faces the demand curve P = 20-1/5Q. a) What is the equilibrium price and output?b) What is the total profit?c) Calculate the consumer surplus, producer surplus, and deadweight loss if the firm acts as a monopolist. Illustrate your answer with a diagramarrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc